Sales of used smartphones are expected to reach $5 billion by 2015 and this market is quite lucrative with used-phones market stretches from the Philippines to Brazil. In Brazil, consumers are willing to pay as much as $1,000 for a new iPhone 5,

Gazelle, a Boston firm that offers money for smartphones online expect that the company forecasts revenue of $100 million this year. According to Israel Ganot, president of Gazelle.

Smartphone Eco-ATM is new to the USA and if it catches on we may well be seeing the idea catching on in Europe.

The stolen smartphone market is thriving largely due to an unregulated trade that spans the globe, authorities say. Used Apple devices are in strong demand overseas, where an iPhone 5 can sell for $500 or more. (It costs as little as $200 in the United States, because it is subsidised by cellular carriers.)

How an ecoATM works

The kiosk scans a person’s ID, snaps a picture of the customer and takes a fingerprint. It then automatically checks the unique phone ID against a local police database, which is updated regularly. If the ID isn’t on the list, the machine instantly dispenses cash to the user.

There are no limits on the number of phones an individual can deposit. D.C. Council member Tommy Wells (D-Ward 6) said police have seen individuals hand off phones to third parties who make the transactions at ecoATMs. In one police video, an elderly woman appeared to act as a middleman and deposited a stack of boxes of phones into a local ecoATM, Wells’ staff said.

These individuals should raise suspicions, Wells said. “Give me a break. EcoATM knows that anyone who wants to quickly trade in a new or hardly used iPhone 5 is suspect, but they do nothing about it,” said Wells, who recently introduced a bill that would force used-phone dealers to do more rigorous checks on their devices.

One solution has been to create a national database of stolen phones, an idea championed by D.C. Police Chief Cathy L. Lanier. Wireless carriers would be banned from activating any phone that appeared on the list. But the effort is only now getting going. And the database won’t curb the growing international problem of stolen phones being reused abroad.

EcoATM says about 20 percent of the thousands of phones it collects each day are sold outside the United States, while Gazelle said half of its business comes from overseas buyers, particularly wholesalers in Hong Kong.

Gazelle wouldn’t disclose its partners in Hong Kong but said firms there act as gateways to the global used-phone market that stretches from the Philippines to Brazil. In Brazil, consumers are willing to pay as much as $1,000 for a new iPhone 5, said Israel Ganot, president of Gazelle. “In any emerging market you will see these stores everywhere that promote themselves as Apple stores and you’ll also see hundreds of people crowded inside,” he said.

The process is so simple that local police fear these ecoATMs are fueling one of the nation’s most pervasive criminal trends — cellphone theft.

The kiosks have become a particular thorn for police in the District, where 40 percent of all forced robberies last year involved a cellphone, the highest percentage in the nation. In a recent investigation, D.C. police found six cellphones stolen from city residents in ecoATMs located in the suburbs. Police in Arlington say they are investigating whether stolen phones have made it into an ecoATM at the Pentagon City mall. Authorities shut the machine down this month, citing a lack of a proper merchant license.

Precautions

EcoATM said it is being unfairly blamed for phone thefts, adding that it tries to filter out stolen phones. Consumers must plug their cellphones into an ecoATM to get cash, and when they do so, the company checks the devices’ unique ID against police databases that list stolen phones.

Matches are extremely rare, the company said. But those databases aren’t always comprehensive. So a report about a stolen phone in the District won’t necessarily be included in the database run by police in the Maryland and Virginia suburbs, said ecoATM, which operates about 340 kiosks across the country.

Biometrics

The ecoATM machines take pictures, and finger prints of everyone who uses it to sell a phone, these are matched up with the unique ID of the phone. The fact that the District, MD, and VA cops can't figure out how to share information on which phones have been reported stolen seems to be their problem. Probably the only stolen phones ending up in these machines are those being sold by people who bought them used and didn't know they were stolen.

“We are disheartened by the focus on us because we are hoping to provide transparency on our reporting, and we want to help the D.C. police come up with solutions to catch thieves,” said Ryan Kuder, ecoATM’s director of marketing.

Smartphones have become the target of too many violent robberies, police say. In the summer of 2011, a Capitol Hill father was brutally beaten with a baseball bat for his iPhone and suffered permanent brain damage. Local police last year set up fencing operations that recovered nearly 500 stolen phones from stores and individual dealers. Law enforcement officials in Los Angeles and Atlanta have also singled out ecoATMs, saying the promises of “instant cash for phones” may be encouraging thieves.

This is a huge problem. The opportunity for quick cash is driving robberies of smartphones,” said Gwendolyn Crump, a spokeswoman for D.C. police.

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